How To Maximize Spousal Social Security Benefits

How To Maximize Spousal Social Security Benefits

As husband and wife, you have been there to support, love, and encourage each other through all of life’s journeys. Amidst the trials and tribulations through to the pure moments of comfort and jubilation. Each day has been a promise to stand by and walk with one another no matter where the path may lead.

You have approached life as a team and that includes your financial planning strategy. Your retirement goals, lifestyle, and cash flow are all things you have planned for together. Another important piece of your retirement plan is maximizing your Social Security benefits and taking full advantage of spousal benefits could be a great way to do that.

What are spousal Social Security benefits? How do they work? In what ways could they impact you? We are going to explore the answers to these questions here today.

Understanding spousal benefits

Spousal Social Security benefits allow one spouse to claim benefits off of another spouse’s work record. This benefit was put in place to allow income for both spouses when one person served as the primary income earner. There are a variety of factors that determine the amount of your benefit including your age, your spouse’s primary insurance amount, and whether you have your own benefits available to you.

A spousal benefit could be up to 50% of the benefit of the primary income earner. For a current spouse to claim spousal benefits they must be at least 62 years old, married for one year, and their spouse already filed for their own benefits. Remember, in order to receive the maximum benefit, you would need to wait to claim spousal benefits until your full retirement age which is 67 for those born after 1960.

Should you claim spousal benefits early at 62 (and all other years before reaching full retirement age), your benefit will be reduced by about 35%. While collecting early does make sense for some couples, ensure that you have weighed the pros and cons before permanently reducing your benefit.

Spousal benefits differ from traditional Social Security benefits because the maximum benefit possible is 50% of your spouse’s benefit. While you can reduce your benefit from filing early, there are no additional delayed credits or incentives to wait to claim after your full retirement age.

There is an exception to the reduction in benefits. If you have been married for at least one year and are caring for a child who is under 16 or disabled, you are able to claim benefits early with no reduction.

To best illustrate this, let’s take a look at an example. Andy and Alex have been married for 30 years. Andy is a business executive and Alex a stay-at-home mom. Andy’s maximum benefit is $2,000 per month and he filed for benefits at his full retirement age. Alex waits until her full retirement age to file for spousal benefits which would grant her $1,000 per month in benefits.

But if both spouses have a work history and are eligible for their own benefits, the Social Security Administration will pay the higher of the two amounts. So if Alex were running a successful business and was eligible for $1,750 based on her own work record, she would receive that amount as opposed to the maximum $1,000 she could have received from a spousal benefit. However, if Alex’s benefit on her work record was only $750, her spousal benefit is higher and she would receive $1,000.

Survivor benefits

Should one spouse pass away, the surviving spouse would be eligible for a survivor benefit starting as early as age 60. If you have reached your full retirement age, however, you will be able to collect 100% of your late spouse’s benefit. For each year that you claim before your full retirement age, those benefits will be reduced.

Widows and widowers do have different options when it comes to filing for their benefits. They can restrict their application and apply for either their survivor’s benefit or their personal benefit and at a later point switch those applications. For those who have a work record, they might file for survivor’s benefits early, while delaying their own benefits and switching at 70 to receive the maximum amount they are able on their own record.

Each person is different and will require their own unique plan. Be sure that you speak with your financial advisor to help create a plan that will work best for you.

If both you and your spouse have already claimed Social Security and one passes away, the surviving spouse will continue to receive the benefit you already have, either yours or your late spouses but not both. The SSA will continue paying the higher of the two amounts but not both making Social Security an important and strategic decision.

Ex-spouses

Ex-spouses still have the opportunity to claim Social Security benefits on their former spouse’s work record if they are at least 62, the marriage lasted for 10 or more years, and they have no remarried. Let’s take a closer look.

In order to be eligible for collecting off of your former spouse’s work record, you have to be unmarried. If you are married, you won’t be able to collect it. Your former spouse’s marital status won’t hinder your ability to collect the benefits.

It is also important that your former spouse be at least 62 years old, but they don’t have to be actively collecting benefits for you to begin enrollment. The same as spousal benefits, an ex-spouse can receive up to 50% of their former spouse’s benefit. You can obtain the full 50% by waiting to collect benefits until your full retirement age, any year before that you will see a reduction in benefits.

Claiming a spousal benefit will not reduce the amount your spouse is able to receive. It is also important to know that your ex-spouse will not be notified in any way when you file for these benefits.

Your benefits your way

Married couples have a unique opportunity to maximize their Social Security benefits with great planning and strategy. Spousal Social Security benefits can offer a great deal of income support for many married couples and widowed spouses alike.No two relationships are exactly the same. Your needs as a couple are unique and it is important that you are able to create a plan that honors your needs both now and in the future.

It is our goal at TFS to help you craft a plan that gives you the freedom and flexibility to live the retirement of your dreams. We know that Social Security plays a vital role in income and cash flow for retirees and want to help you maximize your benefits. Schedule a call with us today. We can’t wait to hear from you!

Author

Dale Terwedo, CFP®, ChFC®, CLU®

Dale has been in practice since 1983. Over the past three decades, he has enjoyed watching his small firm grow into a family of professionals and clients.

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About Our Blog:

Our blog contains our thoughts on everything from starting a portfolio to drawing income from it in retirement. Many of our posts focus on answering frequently asked questions we receive from clients.

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While TFS is a fee-only advisory firm, staff members are also able to provide other products such as life insurance to fulfill the needs of the financial plan which may result in a commission. In such cases, we provide full disclosure of any benefit we may receive.

Neither FSC Securities Corporation, nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal natures, you should consult with your tax or legal counsel for advice.

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